Fannie Mae 2004 Annual Report Download - page 258

FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Restatement of Previously Issued Financial Statements
Overview
As a result of an investigation by the Office of Federal Housing Enterprise Oversight (“OFHEO”) and a review
of our accounting practices by the staff of the Securities and Exchange Commission (“SEC”), we filed a
Form 8-K with the SEC in December 2004 stating that our previously filed interim and audited financial
statements and the independent auditor’s reports thereon for the periods from January 2001 through the second
quarter of 2004 should no longer be relied upon because such financial statements were prepared applying
accounting practices that did not comply with generally accepted accounting principles (“GAAP”).
On May 23, 2006, OFHEO issued a report on its special examination of our business practices. On that date,
we entered into settlements resolving matters with OFHEO and the SEC and agreed to pay a civil penalty of
$400 million, which is recorded in “Other expenses” in the consolidated statement of income for the year
ended December 31, 2004.
In 2006, we completed a comprehensive review of our accounting policies and practices to ensure that they
are in compliance with GAAP. This review included an examination of accounting issues identified by OFHEO
and other third parties, as well as issues identified by our management. As a result, we have restated our
previously reported audited consolidated financial statements for the years ended December 31, 2003 and
2002. We have also restated our previously reported December 31, 2001 consolidated balance sheet to
recognize corrected items that relate to periods prior to January 1, 2002. In these notes to the consolidated
financial statements, we refer to those periods as the “restatement periods.”
Except as otherwise noted, all financial information presented in the consolidated financial statements for the
years ended December 31, 2003 and 2002 and related notes are presented “as restated.” This note describes
the accounting errors identified and corrected in our restatement adjustments. For a description of our
significant accounting policies, see “Note 2, Summary of Significant Accounting Policies.”
Summary of Restatement Adjustments
We have classified our restatement adjustments into the seven primary categories as set forth below. These
categories involve subjective judgments by management regarding classification of amounts and particular
accounting errors that may fall within more than one category. While such classifications are not required
under GAAP, management believes these classifications may assist investors in understanding the nature and
impact of the corrections made in completing the restatement.
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